18 Percent of US County Markets Become Less Affordable

IRVINE, CA—About one in five US housing markets were less affordable in Q2 than their historically normal levels says RealtyTrac in a report released today. Eighteen percent of county markets were less affordable, and that is up from 5% of markets in the previous quarter but down from 20% of markets exceeding their historically normal home affordability levels a year ago.

Daren Blomquist

RealtyTrac, the nation’s leading source for comprehensive housing data, disclosed this data in its Q2 2016 Home Affordability Index , which examines US housing markets by county. The report analyzed median home prices derived from publicly recorded sales deed data collected by RealtyTrac and average wage data from the U.S. Bureau of Labor Statistics in 417 U.S. counties with a combined population of nearly 210 million. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3% down payment — including property taxes and insurance (see full methodology below). Out of the 417 counties analyzed in the report, 74 counties (18%) had an affordability index below 100 in the second quarter of 2016, meaning buying a median-priced home was less affordable than the historically normal level for that county going back to the first quarter of 2005. That was up from 22 counties (5%) exceeding historically normal affordability levels in Q1 2016 but down from 82 counties (20%) exceeding historically normal affordability levels in Q2 2015. “Although nearly one in five U.S. housing markets was not affordable by historic standards in the second quarter, the good news is that affordability is improving compared to a year ago in the majority of markets thanks to a combination of slowing home price appreciation and accelerating wage growth, along with falling interest rates,” said Daren Blomquist , senior vice president at RealtyTrac. “The average interest rate on a 30-year fixed rate mortgage is down 37 basis points from a year ago, while annual wage growth accelerated compared to a year ago in 72% of the markets we analyzed and annual home price growth slowed compared to a year ago in 68%t of the markets, including bellwether markets such as Los Angeles County, Miami-Dade County, Brooklyn, Dallas County, and San Francisco County. “For example in San Francisco County, annual home price appreciation slowed to 2 percent in the second quarter of 2016 compared to 21% in the second quarter of 2015 even while annual wage growth accelerated from 5% to 6%,” Blomquist added. “Affordability constraints are beginning to rein in home price appreciation even while wage growth is gaining speed in an increasing number of markets.” Annual wage growth outpaced annual home price growth in 228 of the 417 counties analyzed (55%), including Miami-Dade County, Florida; Kings County, New York (Brooklyn); Santa Clara County, California in the San Jose metro area; Wayne County, Michigan in the Detroit metro area; and Bexar County, Texas in the San Antonio metro area. Prior to Q2 2016, annual home price growth had outpaced annual wage growth in more than half of the 417 counties analyzed for 16 consecutive quarters going back to Q2 2012. Annual home price growth still outpaced wage growth in 189 of the 417 counties (45%), including Los Angeles County, California; Cook County, Illinois in the Chicago metro area; Harris County, Texas in the Houston metro area; Maricopa County, Arizona in the Phoenix metro area; and San Diego County , California. Buying a median priced home in the second quarter of 2016 required 35.4% of average weekly wages on average across all 417 counties analyzed for the report. Counties least affordable by the absolute standard of percentage of wages needed to buy a median priced home were Kings County (Brooklyn), New York (121.7 % of average weekly wages to buy a median-priced home); Marin County, California in the San Francisco metro area (118.1%); Santa Cruz County, California in the Santa Cruz metro area (113.5%); San Francisco County, California (94.6 %); and Maui County, Hawaii (92.8 %). Counties most affordable by the absolute standard of percentage of wages needed to buy a median-priced home were Clayton County, Georgia in the Atlanta metro area (10.4% of average weekly wages to buy a median-priced home); Wayne County, Michigan in the Detroit metro area (10.9%); Baltimore City, Maryland (11.6%); Bay County, Michigan in the Bay City metro area (12.3%); and Rock Island County, Illinois in the Davenport-Moline-Rock Island metro area (12.4%). Other markets among the top 25 most affordable by absolute standards included counties in Philadelphia, Cleveland, Milwaukee, Cincinnati and St. Louis . The report analyzed median home prices derived from publicly recorded sales deed data collected by RealtyTrac and average wage data from the U.S. Bureau of Labor Statistics in 417 U.S. counties with a combined population of nearly 210 million. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3% down payment, including property taxes, home insurance and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. Only counties with a population of at least 100,000 and sufficient home price and wage data quarterly back to Q1 2005 were used in the analysis.